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MFS in Latin America are competing on services, not price

In the Mobile Financial Services business model, telcos receive a nominal fee from the merchant in most of the transactions, known as M-P2P, M-P2B.

Additionally, in select countries, the user also pays a fee on transactions between different financial institutions.

MFS Latin America

Latin American largest market markets, Brazil and Mexico showcase the lowest fees due to better access to financial infrastructure. For instance, Given a measure from the Mexican Central Bank that lowered mobile payment fees, Transfer is able to apply the lowest multibank M-P2P fee in the region, charging only $0.06/transaction.

However, countries such as Bolivia, Guatemala, El Salvador, Paraguay and Honduras reflect the higher transaction fees for consumers. Because Tigo Money extended its footprint with local branches where agents help users to avail mobile money services. This is reflected in higher transaction fees for consumers.

Despite higher transaction fees for Mobile Financial Service in Central America and selected countries in South America, Tigo Money has proven to be a successful MFS after the company introduced compelling reasons to drive MFS adoption and transactions. Its key features were remittances and bill payments that have a strong appeal in their country of presence. After a decade, Tigo Money became the most successful MFS solution in the region with an appealing portfolio targeting the unbanked population and people living with limited access to banks.

From the marketing and strategic perspective, Tigo explored the way customer value and the price/benefit trade-off work in real uses for MFS. The company quantified benefits as perceived by the customer, where higher-fees, translated into higher-benefits toward its loyalty program.

In addition, the company developed a large set of capabilities required to succeed in the MFS space including management and training of sales force agents, financial and transaction system knowledge and analytics, financial intermediation, etc.